Monday, April 30, 2007

Goodrich Petroleum (NYSE:GDP): RayJay more bullish than ever on the story

- Raymond James is positive on Goodrich Petroleum (NYSE:GDP) saying that after spending several days with management last week, they came away more bullish than ever on the story. The company has never been as well-positioned or with as many potential catalysts as they see emerging over the next six to nine months.

Goodrich announced results last week on their most recent horizontal well in the Cotton Valley. The Champe Graham 3-H has now been on-line for roughly three weeks and is still producing at its initial production rate of 4 MMcfe/d, which indicates an EUR of ~4 Bcfe versus 1 Bcfe/well on traditional vertical wells. RJ estimates that horizontal drilling in only the Bethany-Longstreet field (14% of total acreage) shouldadd at least $5/share to total NAV . While the market seems to pigeonhole Goodrich as a one-trick pony that lives or dies with horizontal drilling results, it should be pointed out that it is only one of seven potential catalysts on the horizon in 2007.

The other catalysts/trends consist of the following: Angelina River, James Lime, Alabama Bend, 20-acre downspacing, new "surgical" fracs, and slim-hole horizontal re-entries. Firm estimates the aggregate of all these along with additional horizontal drilling results in Bethany-Longstreet, could potentially add ~$20 to their current $45 total NAV estimate .

Overall, they believe Goodrich will have a steady stream of positive news the remainder of the year with potential to drive the stock materially higher. Reiterates Strong Buy rating and $45 target price.

Notablecalls: This is the kind of note that makes me feel all warm and fuzzy inside. RayJay is one of the best firms out there and if they spend several days with co's management and come back with very positive comments, I expect there to be considerable upside in the stock over the next couple of weeks. The chart doesn't look bad either! Actionable call alert!